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The past year tested businesses in ways few anticipated. Rising insolvencies, shifting trade flows, and economic uncertainty forced many companies to react rather than plan. As 2026 begins, there is an opportunity to step back and reset.
A well-structured trade credit strategy is one of the most effective tools for managing cash flow and protecting business growth. In business-to-business trade, extending credit to customers who purchase goods or services provided on account is standard practice. Yet credit policies often fall out of sync with market realities during volatile periods. Now is the time to review, adjust and strengthen your approach.
When markets shift quickly, businesses focus on immediate pressures. Credit policies set during stable conditions may not reflect current risks. Payment terms agreed with customers two years ago may no longer suit their financial position. Credit limits approved before a downturn may now carry more exposure than intended.
Global trade patterns continue to evolve amid diversification and shifting supply chains. The Asian Development Bank's 2023 Trade Finance Gaps, Growth, and Jobs Survey reports that the global trade finance gap reached US$2.5 trillion in 2022, up from US$1.7 trillion in 2020, driven by post-pandemic recovery, inflation, interest rate hikes, and geopolitical tensions. This unmet demand hinders SMEs and emerging markets most, potentially extending disruptions for cross-border operations.
Australian businesses face mounting pressures from domestic economic challenges. ASIC data indicates 11,049 companies entered external administration in 2023-24, a 39% rise from 2022-23 levels. Construction (27%), accommodation and food services (15%), and other services (9%) accounted for over half of cases, though rates remain below historical peaks relative to total registered companies.
The Reserve Bank of Australia's Financial Stability Review confirms that cash flow difficulties remain the primary pathway into insolvency. Trading losses, inadequate cash reserves and delayed payments all contribute to business failure. Understanding what credit risk means for your business is the first step toward managing it effectively.
Credit strategies that worked in 2023 or 2024 may no longer fit. A structured review at the start of 2026 can help you identify gaps before they become costly problems.
Four areas deserve close attention as you review your trade credit strategy.
Credit limits often remain unchanged long after they should be reviewed. A customer granted a generous limit during strong trading conditions may now represent excessive risk. Conversely, reliable customers may have grown and could support higher limits that benefit both parties.
Review your largest exposures first. Consider whether each limit reflects the customer's current financial health. Ask whether you would approve the same limit if the customer applied today based on up-to-date information. Knowing how to spot the signs of a failing company can help you make these assessments with greater confidence.
When assessing credit limits, consider the buyer's credit rating and payment history. For larger exposures with publicly traded companies, financial statements and market data can inform your decisions. For private businesses, you may need to rely more heavily on trade references and credit bureau information.
Heavy reliance on a small number of customers creates vulnerability. If one major customer fails to pay, the impact on your accounts receivable could be severe. The 80/20 rule applies to many businesses. Around 20% of customers often account for 80% of sales.
Assess your concentration risk across your entire portfolio. Identify which customers represent the largest share of your accounts receivable balances. Consider whether diversification is possible or whether you need protection for key accounts through trade credit insurance.
Examine your standard terms and any exceptions you have granted. Trade credit functions as an interest-free loan to your customers. When buyers receive trade credit, it supports the buyer's cash flow by allowing them to delay immediate payment. Consider whether the terms remain appropriate given current trading conditions. Shorter terms reduce the risk of non-payment but may affect competitiveness. The right balance depends on your risk appetite and market position. Monitoring your DSO (days sales outstanding) can provide useful insight into how effectively you are managing payment terms.
Review your trade credit terms across different customer segments. Some businesses apply blanket terms when a more tailored approach would reduce risk. Consider whether your terms include provisions for late fees to discourage delayed payment. You might also consider early payment discounts to encourage faster settlement and improve your cash position.
For customers seeking short-term financing through extended payment windows, weigh the commercial benefit against your increased exposure. Trade credit is a form of business financing you provide to your customers. Make sure the terms reflect the value of that financing.
Approving credit is only the beginning. Ongoing monitoring determines whether you catch problems early. Many businesses set up monitoring processes but do not review them regularly. Systems that worked for a smaller customer base may not scale effectively.
Consider how you track changes in payment behaviour. Check whether you receive alerts when customer circumstances change. Late payments often signal deeper problems. Early intervention makes the difference between recovering a debt and writing it off as bad debt. Tools like Atradius Insights can help you monitor your portfolio and spot emerging risks before they escalate.
A credit review at the start of the year offers several benefits. It provides a clear picture of your current exposure across your entire credit portfolio. It identifies accounts that need attention. It allows you to align credit decisions with your broader 2026 business strategy.
A structured approach works better than ad hoc adjustments. Set aside time to systematically review your portfolio. Prioritise high-value and high-risk accounts. Document your findings and the actions you plan to take.
This exercise also helps identify process improvements. You may discover that credit decisions are being made without current credit information. You may find that approvals lack consistency across different parts of your business. A review provides an opportunity to address these issues and strengthen your overall credit management.
Building strong relationships with your customers does not mean ignoring credit risk. The best customer relationships are built on clear expectations and consistent trade credit terms that work for both parties. Your trade credit team plays a vital role in maintaining these relationships while protecting the business.
Trade credit insurance protects your business when customers default on payments. It covers losses from insolvency and protracted default. For many businesses, this protection enables more confident credit decisions without restricting growth.
Without insurance, credit decisions often become conservative during uncertain times. Businesses may reduce limits or tighten terms to manage the risk of non-payment. These defensive moves protect the balance sheet but can limit your ability to sell goods and services to new customers.
Trade credit insurance changes this dynamic. With coverage in place, you can extend credit to customers you might otherwise avoid. You can offer competitive terms while knowing your accounts receivable are protected. Trade credit insurance protects your cash flow and supports business growth without exposing your company to unacceptable risk. Learn more about how trade credit insurance benefits your business.
Insurance also brings access to valuable credit information. Trade credit insurers assess buyer risk across industries and markets. This insight helps you make better-informed business decisions about who to trade with and on what terms. You gain access to data on customer credit history and payment defaults that would otherwise be difficult to obtain.
The cost is typically modest relative to the protection provided. Trade credit insurance policies often cost between 0.1% and just over 1% of turnover. For many businesses, this represents a sensible investment in risk management. You can find more details on how much credit insurance costs.
Trade credit insurance solutions also support your relationship with banks and other financing sources. Insured receivables can strengthen your balance sheet and improve access to business financing. If you trade with domestic and export customers, you may also want to explore whether you can insure your export credit.
Even with strong credit management, some customers will fail to meet their payment obligations. Late payments and unpaid invoices can strain your cash flow and divert resources away from core business activities.
Having a clear process for collecting debt is essential. Acting early improves your chances of recovery. The longer a debt remains outstanding, the harder it becomes to collect.
Professional debt collection services can help recover outstanding amounts while, where appropriate, preserving customer relationships. This is especially valuable when dealing with international trade debts or complex situations.
As you reset your trade credit strategy, consider these questions:
2025 reminded businesses that market conditions can shift quickly. The companies that managed best were those with strong credit foundations already in place. As 2026 begins, you have the chance to strengthen your position.
Review your trade credit strategy with fresh eyes. Address the areas that have drifted out of alignment. Consider how trade credit insurance could support your growth plans while protecting your cash flow and trade receivables.
A deliberate reset now can prevent reactive decisions later. It positions your business to pursue opportunities with confidence rather than caution.
Atradius can help you build a stronger trade credit strategy for 2026. Contact our trade credit team to discuss how trade credit insurance solutions could protect your business and support your growth. Ask us about comprehensive cover options for your domestic and export customers.